Senator Charles E. Grassley may be backing away from his threat to offer legislation that would require the wealthiest institutions to spend up to 5% of their endowment assets each year. At a panel discussion on Capitol Hill last week, the Iowa senator, who is the senior Republican on the Senate Finance Committee, strongly hinted that he would abandon his plan if colleges continued to raise their spending on financial aid. The hearing last week came nine months after Grassley and the committee's chairman, Senator Max S. Baucus, a Democrat of Montana, sent a letter to 136 institutions with endowment holdings of $500-million or more, asking about endowment growth and spending on student aid. That move followed a fiscal year in which college endowments enjoyed their biggest investment gains in nearly a decade, earning an average return of 17.2%. Since then several elite institutions have announced they will spend more of their endowments on tuition assistance, and Grassley told "The Chronicle" in July that he thought he saw "an evolution of change of concern of universities toward the use of their endowment to a greater extent to help students." Still, both Grassley and Representative Peter Welch, the Vermont Democrat who led last week's four-hour discussion, made clear that they would continue to scrutinize university finances, saying they owed it to taxpayers to ensure that endowments were spent wisely.